Star Trading Co. vs Dy. Commr. of Central Excise

J.P. Devadhar, J.—Appellant is aggrieved by the order dated 17-3-2006 [2006 (199) ELT 151 (Tri. - Mumbai)] made by CESTAT/Respondent No. 3 wherein the claim of the Appellant seeking interest from the excise department on the National Saving Certificates belonging to the Appellant from the date of maturity till payment has been rejected.

The Appellant had given to the excise department two National Saving Certificates valued at Rs. 6,000/- having maturity value of Rs. 9,000/- by way of security for holding L5 licence. The said National Saving Certificates were due to mature in the year 1981-82.

Sometime in the year 1979 the role of L5 licence came to an end as the Government abolished excise duty on tobacco. The National Saving Certificates given by the Appellant as security were, however, not released by the Excise authorities on the ground of proceedings pending against the Appellant.

After the adjudication proceedings culminated into an order in original, the excise authorities on 23-3-2000 encashed the said National Saving Certificates amounting to Rs. 9000/- towards realisation of excise dues under the order in original. The Appellant challenged the said order in original by filing an appeal and the Commissioner of Central Excise (Appeals) allowed the appeal filed by the Appellant and set aside the demand. Thereupon the Appellant filed refund claim on 28-3-2003 seeking refund of sum of Rs. 9,000/- with interest from the date of maturity till payment. By an order in original dated 22-5-2003 the Assessing Officer allowed the refund claim of Rs. 9,000/- u/s 11B of the Central Excise Act but denied interest on the ground that withholding of National Saving Certificates would not amount to recovering excise duty and consequently paying interest from the date of maturity of National Saving Certificates does not arise at all. Challenging the aforesaid order, the Appellant filed Appeal and by the impugned order dated 17-3-2006 the CESTAT dismissed the appeal. Hence, this appeal.

It is the contention of the Appellant that the excise authorities were not justified in retaining the security given for L5 licence even though the role of L5 licence came to an end in the year 1979. Having wrongfully withheld the payment under the National Saving Certificates for all these years, the excise department cannot escape liability to pay interest. Relying upon the judgments of apex court in Sandvik Asia Ltd. Vs. Commissioner of Income Tax-I, Pune and Others, and in the case of Life Insurance Corporation of India v. Gangadhar Vishwanath Ranade (Dead) by L. Rs. - AIR 1990 S.C. 185 the Appellant submits that he is entitled to interest on the amount of Rs. 9,000/- from the date of maturity till the date of payment.

We see no merit in the above contention. As regards the interest for the period from the date of maturity of National Saving Certificates is concerned, in our opinion, the Tribunal was justified in holding that withholding of securities on account of the pending proceedings would not mean that any amount has been realised towards excise duty. Consequently granting interest on the securities from the date of maturity till the date of payment does not arise at all.

In fact, the National Saving Certificates were encashed on 23-3-2000 for realisation of the demand crystalised against the Appellant. It appears that the amount received by the excise department on realisation of the National Saving Certificates was Rs. 9,000/-. After the demands raised against the Appellant were set aside by Commissioner of Central Excise (A), the refund claim of the Appellant has been allowed u/s 11B of the Central Excise Act without any interest. In such a case, interest, if any, could be from the date of recovery till the date of payment. As the amount was recovered on 23-3-2000, the question of paying interest could be for the period from 23-3-2000 and not for the period prior thereto.

Excise authorities can grant interest only in accordance with the provisions of the Central Excise Act. In the present case, whether the Appellant was entitled to interest from the date of recovery of excise duty till the date of refund has not been considered by the Tribunal.

The decisions relied upon by the Appellant have no relevance to the facts of the present case inasmuch as in none of those cases the grant of interest under the provisions of the Central Excise Act, 1944 have been considered.

In view of the above, we set aside the order dated 17-3-2006 passed by CESTAT and direct the Tribunal to consider the case of the Appellant for grant of interest from the date of recovery of the amount of Rs. 9,000/- on 23-3-2000 till refund in accordance with law. Appeal is disposed of accordingly.